Jammu & Kashmir and Ladakh High Court
Case BriefsHigh Courts

   

Jammu and Kashmir and Ladakh High Court: While deciding the instant petitions, the question that came up before that Court was whether a person can be prosecuted for offence under Section 420 of IPC as also for offence under Section 138 of NI Act, on the same set of facts and whether or not it would amount to double jeopardy. The single Judge Bench of Sanjay Dhar, J., observed that the offences under Section 138, NI act and Section 420, IPC, are two distinct offences, therefore the principle of double jeopardy or rule of estoppel does not come into play.

Relevant Facts of the case: The two clubbed petitions dealt with complaints filed by the respondents under S. 138 of Negotiable Instruments Act, 1881 concerning the sale of a patch of land. In both cases, the petitioners approached the respondents to sell the land and promised to pay damages if the sale did not proceed. In both cases the land could not be cold thereby the respondents became entitled to damages. The petitioners issued cheques drawn on HDFC Bank Branch unit Baghat, Barzulla, bearing the amount that was to be paid as damages; however, the cheques were dishonoured with the endorsement “drawers account closed”.

Contentions: The petitioners submitted before the Court that the respondent, prior to the filing of the complaints under S. 138, NI Act, had filed an FIR for offences under Section 420, 506 IPC, the contents of which are identical to the impugned complaints. The petitioners argued that they cannot be prosecuted twice on the basis of some set of facts as it would amount to double jeopardy. It was also contended that continuance of proceedings in the impugned criminal complaints would be an abuse of process of law and it would amount of forum shopping.

Analysis/ Observations: Perusing the facts and contentions of the matter, the Court referred to Maqbool Hussain v. State of Bombay, 1953 SCR 730, wherein the Constitution Bench of the Supreme Court had dealt with the issue of double jeopardy and held that the fundamental right which is guaranteed under Art. 20(2) of the Constitution enunciates the principle of “double jeopardy” i.e., a person must not be put in peril twice for the same offence. The High Court further referred the case of Sangeetaben Mahendrabhai Patel v. State of Gujarat, (2012) 7 SCC 621.

  • The High Court observed that offences under Section 138 of the NI Act and Section 420 of IPC are distinct from each other because ingredients of the two offences are different. Examining the distinctions in both the offences, the Court pointed out that- in a prosecution under Section 138, fraudulent or dishonest intention at the time of issuance of cheque need not be proved; but in a prosecution under Section 420, fraudulent or dishonest intention is an important ingredient to be established.

  • It was further noted that for an offence under Section 138, NI Act, it has to be established that the cheque has been issued by the accused to discharge a legally enforceable debt or liability and the same has been dishonoured for insufficiency of funds etc. and despite receipt of statutory notice of demand, the accused has failed to pay the amount of cheque within the stipulated time. Whereas in Section 420, IPC, it has to be proved by prosecution that at the very inception i.e., at the time of issuance of the cheque by the accused, he had a dishonest intention.

Decision: With the afore-stated analysis, the Court dismissed the petitions and held that merely because the respondent had lodged an FIR under Section 420, IPC containing allegations relating to the same transaction, which is subject matter of the impugned complaints, it does not make out a case of forum shopping or double jeopardy. The Court further held that the respondents are well within their rights to continue prosecution for both these offences under Section 138 of NI Act and Section 420 of IPC simultaneously.

Upon the question of belated filing of the impugned complaints, the Court held that the impugned complaints have been filed by respondents during the period which is covered by the order of the Supreme Court in Cognizance for Extension of Limitation, In re, (2022) 3 SCC 117.

[Fayaz Ahmad Sheikh v. Mushtaq Ahmad Khan, CRM(M) No.280/2021, decided on 15-07-2022]


Advocates who appeared in this case :

Sheikh Hilal, Advocatefor the Petitioner;

Waseem Shamas, Advocate, for the Respondents.


*Sucheta Sarkar, Editorial Assistant has prepared this brief

Karnataka High Court
Case BriefsHigh Courts

Karnataka High Court: M. Nagarprasanna J. allowed a petition filed under Section 482 of Criminal Procedure Code, 1973 (CrPC) seeking quashing of the impugned order passed by the Additional Chief Metropolitan Magistrate. Therefore, the magistrate court directed that interim compensation be given as per the “conduct of the accused” for the applications filed under Section 143-A of the Negotiable Instruments Act, 1881 (NI Act).

The observation came after the Court noticed that it was “flooded with litigation with regard to grant of compensation under Section 143-A of the NI Act by criminal courts”. Noticing that in several cases discretion is exercised for grant of compensation and in several other cases there are no reasons for exercise of such discretion, the Court found it necessary to direct Magistrates to consider the conduct of the accused at the outset while considering applications filed under Section 143-A of the Act.

“If the accused has been unnecessarily evading the proceedings by seeking adjournments, consideration of the application would become imperative as the amendment itself is introduced to compensate such payees of delay tactics adopted by unscrupulous drawers of cheques.”

Facts of the case

The petitioner and the respondent entered into an agreement in 2017 for the distribution of ice cream and frozen dessert products manufactured by the respondent. As per the agreement, the respondent had demanded the petitioner the issuance of blank cheques as security instead of the proposed supply to be made to the petitioner. Therefore, the petitioner issued several blank cheques to the respondent.

A complaint was filed invoking Section 200 of the CrPC for offences punishable under Section 138 of the NI Act when the cheque of Rs 5,56,71,208/- was dishonored on the grounds of want of sufficient funds in the account.

The trial court, after considering the facts, gave the impugned order of granting 10% interim compensation in terms of section 143-A of the NI Act.

Analysis of the court

Firstly, the court noted that Section 143-A of the Act was introduced for a specific purpose. The purport of the amendment was that the court may, in certain circumstances, award interim compensation which shall not exceed 20% of the amount of the cheque and such interim compensation can be permitted to be withdrawn in terms of the said amendment. Therefore, the court in such cases directs the accused to pay interim compensation under section 143-A. In circumstances when the accused would not deposit the amount directed by the Court, it is recoverable by initiating proceedings under Section 421 of the CrPC. Therefore, the provision which is a directory in the beginning snowballs into becoming mandatory and penal by the time the realization of the deposit amount is made.

The Court, further, explained the following “two-fold discretion” that are sine qua non for an order to be passed by the Magistrate while considering the application under Section 143-A of the NI Act.:

  • First: In a given case if the accused is cooperating with the trial without seeking any unnecessary adjournments, not absenting himself or his counsel on any date and cooperating with the conclusion of the trial in such cases, the learned Magistrate will have to apply his mind, exercise his discretion as to whether such applications should be entertained at all.

  • Second: In any given case, the compensation may vary from 1% to 20%. As the mandate of the statute is that it should not exceed 20%, in the cases where Magistrate proceeds to grant compensation, has to bear in mind the amount involved in the instrument, as certain transactions would run to several cores and the accused may have formidable defence against the complainant. In such cases, the Magistrate should exercise discretion in a cautious manner. Here again the conduct of the accused should be noticed.

The court opined that application of mind and passing of a reasoned order of grant of compensation becomes necessary in penal cases that ensue an accused who failed to comply with the order granting 20% compensation as the complainant is given several remedies of recovery which result in the accused being taken into custody. Hence, such orders which result in such penal consequences should be rendered by giving cogent reasons which would demonstrate the application of mind, and such orders should be passed only after hearing the accused in the matter.

Ruling on facts

In the case at hand, involving the amount of Rs. 55 Lakhs, it was observed that the order of the Magistrate did not bear any reason. Hence, the Court held that the Magistrate after analyzing the conduct of the accused should grant compensation which would vary from 1% to 20% after recording necessary reasons and therefore set aside the impugned order and remitted back the matter to the hands of themagistrate.

[V. Krishnamurthy v. Diary Classic Ice Creams Pvt. Ltd., 2022 SCC OnLine Kar 1047, decided on 01-06-2022]


Advocates who appeared in this case :

Maruthi, Joshna Hudson Samuel, Advocates, for the Petitioner;

Dinesh SK, Advocate, for the Respondent.

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Tis-hazari
Case BriefsDistrict Court

Tis Hazari Courts, New Delhi: While addressing a decision revolving around Section 138 of Negotiable Instruments Act, 1881, Sanjay Sharma-II, Additional Sessions Judge-03, upheld the decision of the Trial Court and held that all the ingredients of Section 138 NI Act were fulfilled by the complainant.

A criminal appeal under Section 374 of the Criminal Procedure Code, 1973 was directed against the decision in case regarding Section 138 of the Negotiable Instruments Act, 1881, whereby the trial Court convicted the appellant for the said offence.

Factual Background


The complainant had filed a complaint under Section 138 of the NI Act that the appellant and her husband had friendly relations for 5 years and in the guise of the same, a friendly loan of Rs 1,00,000 was taken by the appellant.

At the time of returning of loan money, two cheques were issued but were returned unpaid with the remark “FUNDS INSUFFICIENT”. On re-representation, the said cheques were returned unpaid with the remark ‘OTHER REASONS’. Despite the receipt of the demand appellant failed to make payment of cheque.

Hence, a complaint under Section 138 NI Act was filed and the trial court while convicting the appellant under Section 138 NI Act, pronounced the following decision:

(a) The appellant admitted that the said cheques were drawn on an account maintained by him;

(b) The said cheques were presented for encashment within period of their validity;

(c) The reason for dishonour of the said cheques i.e. ‘Other reasons’ is a specie covered under the genus ‘dishonour of cheque for insufficiency, etc., of funds in the account’;

(d) The appellant was duly served with the demand notice through his real brother, namely, Lokesh;

(e) There is a legal presumption that the said cheques were drawn for consideration and in discharge of debt or other liability; and

(f) The appellant failed to raise probable defence to rebut presumption of existence of legally enforceable liability.

On being aggrieved with the above, the present appeal was preferred.

Scope of Jurisdiction of First Appellate Court

Appellant Court’s jurisdiction is co-extensive with that of the trial court in the matter of assessment, appraisal and appreciation of the evidence and also to determine the disputed issues.

Points for Consideration

(a) Whether the complainant is required to prove that she received the said cheques in discharge of any debt or other liability? 

Once the signatures of the appellant on cheques were established, ‘reverse onus’ clauses under Sections 118 and 139 NI Act become operative.

The appellant must raise a ‘probable defence’ and the standard of proof is ‘preponderance of probabilities’.

The appellant can lead direct evidence or rely upon evidence adduced by the complainant to show that consideration or debt did not exist, or non-existence of consideration or debt is probable.

(b) Whether dishonour of the said cheques with remark ‘Other reasons’ is covered under Section 138 NI Act?

The appellant had neither attributed nor proved that the said cheques were dishonoured on account of any negligence of his banker. The appellant did not make payment of cheque amount despite receipt of demand notice. Therefore, this Court opined that dishonour of cheques with remark ‘other reasons’ was covered under Section 138 NI Act, as any other interpretation would defeat the object of provisions of Section 138 NI Act.

(c) Whether non-examination of husband of the complainant is fatal to her case?

In Court’s opinion, husband of the complainant was not a material witness. The complainant need not examine him to prove friendly relation with the appellant. Further, the complainant’s husband had no role in a transaction in question and if the appellant wanted to prove absence of the said relation, he could have examined him in defence.

(d) Whether the complainant was required to examine witness from bank to prove cheque returning memos?

It was contended that the complainant did not examine the witness from her bank to prove cheque returning memos and stamps.

Section 146 NI Act provides that bank’s memo is prima facie evidence of the fact of dishonour of cheque.

The complainant had filed original cheque returning memos pertaining to dishonour of the said cheques vide memos and appellant led no evidence to rebut the presumption that the said memos were not issued by his banker in relation to dishonour of the said cheques.

In the present matter, the appellant did not show that he had suffered any prejudice during trial by the Trial Court and neither contended that there was any miscarriage of justice.

Conclusion


In Court’s opinion, the complainant established all pre-requisites as required under Section 138 NI Act, hence the appellant was rightly convicted for committing offence under Section 138 NI Act.

The Bench directed the appellant to surrender before the trial Court. [Deepak Kumar v. Mehnaz, 2022 SCC OnLine Dis Crt (Del) 14, decided on 9-5-2022]

Bombay High Court
Case BriefsHigh Courts

Bombay High Court: Stating that it is the duty of every Advocate to uphold professional integrity so that citizens can legally secure justice, the Division Bench of V.M. Deshpande and Amit B. Borkar, JJ., expressed that, professional misconduct refers to its disgraceful conduct not befitting the profession concerning the legal profession, which is not a business or trade and therefore, it must remain decontaminated.

Applicants had invoked the jurisdiction of this Court under Section 482 of the Code of Criminal Procedure challenging the registration of FIR for an offence punishable under Sections 420, 406, 409 and 120B of the Penal Code, 1860 read with Section 3 of the Maharashtra Protection of Interest of Depositors (In Financial Establishments) Act, 1999.

It was submitted that applicants and non-applicant 3 resolved their dispute amicably and therefore, the Court proceedings were required to be set aside.

Factual Scenario


Post-dated cheques for the amount to be paid to non-applicant 3 by the applicants were handed over to Advocate Anilkumar Mulchandani. Further, it was added that, till 23-3-2022, the post-dated cheques were not handed over to non-applicant 3.

During the course of hearing, Anilkumar Mulchandani, Advocate submitted that non-applicant 3 had not demanded post-dated cheques from him.

Issue


Whether the non-applicant 3, in fact, demanded the cheques or not and whether Anilkumar Mulchandani, Advocate refused to hand over the cheques to non-applicant 3?

Analysis, Law and Decision


Bench in view of the clear language of the Deed of Settlement (absence of clause to withhold post-dated cheques till the release of the applicant on bail or quashing of FIR) and considering the affidavit filed by the non-applicant no. 3 denying the grant of permission to withhold cheques till the release of the applicant on bail or quashing of FIR, prima facie, it appears that Shri Anilkumar Mulchandani, Advocate, had refused to hand over the cheques in spite of demand made by non-applicant 3.

Since Anilkumar Mulchandani, Advocate was not justified in keeping the post-dated cheques with him, the Court expressed that it is constrained to refer the present case to the Bar Council of Maharashtra and Goa to hold an inquiry as to whether the act of the Advocate withholding post-dated cheques, amounts to misconduct within the meaning of Section 35 of the Advocates Act, 1961?

High Court remarked that,

“We are perturbed by the act of the Advocate to keep valuable security owned by the Client with him.”

The term misconduct means wrongful gain and not ere error of judgment.

One of the main objectives behind Section 35 of the Advocates Act is to prevent the exploitation of clients at the receiving end of the Advocate’s services and maintain the legal profession’s integrity.

The Bench also observed that, the lawyer-client relationship is a fiduciary one; any act which is detrimental to the legal rights of clients needs to be punished.

The Supreme Court explored the amplitude and extent of the words “professional misconduct” in Section 35 of the Advocates Act in the case of Pralhad Saran Gupta v. Bar Council of India, (1997) 3 SCC 585, wherein the Supreme Court has held that retaining amount by the Advocate which is deposited with him on behalf of the decree-holder amounts to misconduct.

Elaborating further, the High Court opined that while dealing with money or any other articles or documents entrusted with the Advocate, he is expected to keep in mind the high standards of the professions and its value practised for centuries.

The Advocates owe a social obligation to the Society while discharging professional services to the litigant. The Advocate should not commit any act by which a litigant could be deprived of his statutory and constitutional rights on account of the sublime position conferred upon him under the judicial system in the country.

On noting the above, the Bench directed the Bar Council of Maharashtra and Goa to hold an inquiry into the allegations made by non-applicant 3 against Advocate Anilkumar Mulchandani.

As the applicants sought permission to withdraw the present application unconditionally, Court disposed of this application as withdrawn. [Pankaj v. State of Maharashtra, 2022 SCC OnLine Bom 771, decided on 6-4-2022]


Advocates before the Court:

Shri Anil Mardikar, Senior Advocate a/w. Shri P. V. Navlani & Shri Rommill Jain, Advocate for applicants.

Shri T. A. Mirza, APP for non-applicant nos. 1 and 2/State.

Shri Anilkumar Mulchandani, Advocate for non-applicant no. 3.

Case BriefsSupreme Court

Supreme Court: In a case where it was argued before the Court that an offence under Section 138 of the Negotiable Instruments Act was not made out as the dishonourment alleged is of the cheques which were issued by way of ‘security’ and not towards discharge of any debt, the bench of MR Shah and AS Bopanna*, JJ has held that a cheque issued as security pursuant to a financial transaction cannot be considered as a worthless piece of paper under every circumstance and that there cannot be a hard and fast rule that a cheque which is issued as security can never be presented by the drawee of the cheque.

The Court explained that ‘security’ in its true sense is the state of being safe and the security given for a loan is something given as a pledge of payment. It is given, deposited or pledged to make certain the fulfilment of an obligation to which the parties to the transaction are bound.

“If in a transaction, a loan is advanced and the borrower agrees to repay the amount in a specified timeframe and issues a cheque as security to secure such repayment; if the loan amount is not repaid in any other form before the due date or if there is no other understanding or agreement between the parties to defer the payment of amount, the cheque which   is   issued   as   security   would   mature   for presentation and the drawee of the cheque would be entitled to present the same. On such presentation, if the same is dishonoured, the consequences contemplated under Section 138 and the other provisions of N.I. Act would flow.”

When a cheque is issued and is treated as ‘security’ towards repayment of an amount with a time period being stipulated for repayment, all that it ensures is that such cheque which is issued as ‘security’ cannot be presented prior to the loan or the instalment maturing for repayment towards which such cheque is issued as security.

Further, the borrower would have the option of repaying the loan amount or such financial liability in any other form and in that manner if the amount of loan due and payable has been discharged within the agreed period, the cheque issued as security cannot thereafter be presented. Therefore, the prior discharge of the loan or there being an altered situation due to which there would be understanding between the parties is a sine qua non to not present the cheque which was issued as security. These are only the defences that would be available to the drawer of the cheque in a proceedings initiated under Section 138 of the N.I. Act. Therefore, there cannot be a hard and fast rule that a cheque which is issued as security can never be presented by the drawee of the cheque. If such is the understanding a cheque would also be reduced to an ‘on demand promissory note’ and in all circumstances, it would only be a civil litigation to recover the amount, which is not the intention of the statute.

“When a cheque is issued even though as ‘security’ the consequence flowing therefrom is also known to the drawer of the cheque and in the circumstance stated above if the cheque is presented and dishonoured, the holder of the cheque/drawee would have the option of initiating the civil proceedings for recovery or the criminal proceedings for punishment in the fact situation, but in any event, it is not for the drawer of the cheque to dictate terms with regard to the nature of litigation.”

[Sripati Singh v. State of Jharkhand, 2021 SCC OnLine SC 1002, decided on 28.10.2021]


Counsels

For appellant: Advocate M.C. Dhingra

For respondents: Advocate Raj Kishor Choudhary and Keshav Murthy


*Judgment by: Justice AS Bopanna

Know Thy Judge | Justice A. S. Bopanna

Case BriefsHigh Courts

Bombay High Court: The Division Bench of V.K. Jadhav and Shrikant D. Kulkarni, JJ., observed that,

“…in the case of cheating, the intention of cheating right from the inception is important.”

Instant matter was directed towards quashing the FIR registered for the offence punishable under Sections 420, 323, 504, 506 of Penal Code, 1860.

Respondent 2 dealt used to sell onion collected from small farmers in the wholesale market on commission. Allegedly the applicants had purchased a huge quantity of onion. Respondent 2 submitted that the amount to the tune of Rs. 30,77,431/- towards the price of purchased onion remained unpaid.

Even after repeated demands for the said amount, applicant did not pay the said amount.

Analysis, Law and Decision

High Court expressed that the power of quashing the criminal proceeding should be exercised very sparingly and with circumspection and that too in a rarest of rare cases.

Court is not justified in embarking upon the inquiry as to the reliability or genuineness or otherwise of the allegations made in the F.I.R. or the complaint and that extraordinary or inherent powers do not confer an arbitrary jurisdiction on the Court to act according to its whim and caprice. 

Court noted that respondent 2 did not dispute about the filing of the complaints against the deceased for having committed the offence punishable under Section 138 NI Act.

Bench was surprised to note that the allegations were made against the deceased alone with the specific contention that he was the proprietor and in that capacity, he had issued the cheques for the balance amount.

Adding to the above, Court observed that it was not stated in those complaints that deceased Selvakumar, being a power of attorney, had issued the cheques in favour of respondent 2 for the balance amount on behalf of the firm and therefore, since he being the signatory of the cheques, the complaints under Section 138 of the Negotiable Instruments Act, 1881 came to be filed against him.

After the death of the deceased, respondent 2 changed his stand and instituted the suit wherein the applicants have been implicated as defendants.

In Court’s opinion, respondent 2 had filed the complaint with some ulterior motive and mala fide intention.

“…lodging of the complaint in the police station with some mala fide intention is nothing but an attempt to convert a civil dispute into a criminal dispute.” 

In Supreme Court’s decision of Anand Kumar Mohatta v. State (NCT of Delhi), (2019) 11 SCC 706, it was ruled that where a civil dispute is converted into a criminal case to harass the accused, the exercise of power to quash criminal proceedings warranted.

Dispute in the present matter was purely of civil nature and it did not constitute a criminal offence.

Hence, Court opined that the F.I.R. lodged by respondent 2 is nothing but an abuse of the process of the court and the same is necessary to be quashed and set aside in the interest of justice.

In view of the above discussion, criminal application was disposed off. [Thirumalai Prabhu R v. State of Maharashtra, 2021 SCC OnLine Bom 874, decided on 18-06-2021]


Advocates who appeared in this case:

Advocate for Applicants: Mrs. Sonawane Sunita G.

APP for Respondent No. 1-State: Mr. G.O. Wattamwar

Advocate for Respondent No. 2: Mr. Rahul R. Karpe

Reserve Bank of India
Hot Off The PressNews

Extension of Cheque Truncation System (CTS) across all bank branches in the country.

What is Cheque Truncation System (CTS)?

Cheque Truncation System of Image-based Clearing System is for faster clearing of cheques.

Cheque Truncation speeds up the process of collection of cheques resulting in better service to customers, reduces the scope of loss of instruments in transit, lowers the cost of collection of cheques, and removes reconciliation-related and logistics-related problems, thus benefitting the system as a whole.

When was CTS implemented?

The CTS is in use since 2010 and presently covers around 1,50,000 branches. All the erstwhile 1219 non-CTS clearing houses (ECCS centres) have been migrated to CTS effective September 2020. It is, however, seen that there are branches of banks that are outside any formal clearing arrangement and their customers face hardships due to longer time taken and cost involved in collection of cheques presented by them.

CTS to extend across all bank branches

To leverage the availability of CTS and provide uniform customer experience irrespective of location of her/his bank branch, it has been decided to extend CTS across all bank branches in the country. To facilitate this, banks shall have to ensure that all their branches participate in image-based CTS under respective grids by September 30, 2021. They are free to adopt a model of their choice, like deploying suitable infrastructure in every branch or following a hub & spoke model, etc. and concerned banks shall coordinate with the respective Regional Offices of RBI to operationalise this.


Reserve Bank of India

Case BriefsHigh Courts

Delhi High Court: Subramonium Prasad, J., addressed a matter wherein it was reiterated that the initial burden of proving the burden of the non-existence of debt is on the accused under Section 118 of Negotiable Instruments Act, 1881.

The instant revision petition was filed against the order passed dismissing the appeal and affirming the Metropolitan Magistrate’s order convicting the petitioner for offences punishable under Section 138 of Negotiable Instruments Act, 1881.

Petitioner has also challenged the order wherein the petitioner has been sentenced to undergo imprisonment for a period of two months and also directed the petitioner to pay an amount of Rs 13 lakhs as fine payable as compensation to the respondent as per the provision of Section 143 (1) of NI Act read with Section 357 (1)(3) of CrPC.

Facts that lead to the case

Respondent financed a bus for the petitioner by giving a loan and in discharge of the liability, petitioner handed over the cheques in favour of the respondent. When the said cheques were deposited they were returned as unpaid/dishonored for the reason ‘Funds Insufficient’.

Petitioner submitted that the vehicle was handed over to the respondent company for getting the vehicle converted to CNG but the said vehicle was never returned to the petitioner nor the accounts related to the hire purchase were settled. In fact, the blank cheques given to the respondent earlier were misused.

Though Metropolitan magistrate found the petitioner’s deposition to be inconsistent and found that the bus was already sold by the petitioner.

Metropolitan Magistrate, therefore, held that the accused/petitioner was not been able to rebut the presumption that the cheques had been paid for the discharge of any liability and hence convicted under Section 138 NI Act.

Analysis, Law and Decision

Section 118 of the NI Act raises a presumption that a cheque is issued for consideration until the contrary is proved. It is well settled that the initial burden in this regard lies on the accused to prove the non-existence of debt by bringing on record such facts and circumstances which would lead the Court to believe the non-existence of debt either by direct evidence or by preponderance of probabilities.

In the instant matter, other than mere ipsi dixit of the petitioner there was no debt due and payable nothing was on record to show that the cheques were not issued for discharge of liability for the bus.

Bench stated that the purpose of introducing Section 138 of the NI Act was to bring sanctity in commercial transactions.

Further, the Court noted that the lower courts on perusal of records came to the conclusion that the cheques were given in discharge of the debt.

While expressing that the scope of revision petition under Sections 397/401 CrPC read with Section 482 CrPC is extremely narrow Court referred the following Supreme Court decisions:

State v. Manimaran, (2019) 13 670

State of Haryana v. Rajmal, (2011) 14 SCC 326

In view of the above discussion, Bench did not find any that required the interference in the lower court’s judgment.

Further, the Court added that the respondent did not file the books of accounts was not fatal to the case of the respondent. It was open to the petitioner to produce his books of accounts to rebut the presumption and bring out a prima facie case that there was no debt due and payable on the date the cheques were dishonoured.

Petitioner failed to show as to how there was no subsisting debt on the date when the cheques were dishonoured due to insufficiency of funds.

In view of the above discussion, the revision petition was dismissed. [G.D. Kataria v. AVL Leasing & Financing Ltd., 2020 SCC OnLine Del 1056, decided on 03-02-2021]


Advocates for the parties:

Petitioner: Medhanshu Tripathi, Advocate

Respondent: Anuj Soni, Advocate

Reserve Bank of India
Hot Off The PressNews

Positive Pay System for Cheque Truncation System (CTS)

The concept of Positive Pay involves a process of reconfirming key details of large value cheques. Under this process, the issuer of the cheque submits electronically, through channels like SMS, mobile app, internet banking, ATM, etc., certain minimum details of that cheque (like date, name of the beneficiary/payee, amount, etc.) to the drawee bank, details of which are cross-checked with the presented cheque by CTS. Any discrepancy is flagged by CTS to the drawee bank and presenting bank, who would take redressal measures.

National Payments Corporation of India (NPCI) shall develop the facility of Positive Pay in CTS and make it available to participant banks. Banks, in turn, shall enable it for all account holders issuing cheques for amounts of ₹50,000 and above. While availing of this facility is at the discretion of the account holder, banks may consider making it mandatory in case of cheques for amounts of ₹5,00,000 and above.

Only those cheques which are compliant with the above instructions will be accepted under dispute resolution mechanism at the CTS grids. Member banks may implement similar arrangements for cheques cleared/collected outside CTS as well.

Banks are advised to create adequate awareness among their customers on features of Positive Pay System through SMS alerts, display in branches, ATMs as well as through their website and internet banking.

Positive Pay System shall be implemented from January 01, 2021.


Reserve Bank of India

[Press Release dt. 25-09-2020]

Case BriefsHigh Courts

Allahabad High Court: While deciding a petition filed under Article 227 of the Constitution of India, Suresh Kumar Gupta, J., dismissed the same and declined to interfere in the judgment delivered by Sessions Court.

The present petition has been filed by the petitioner to set aside the impugned orders dated 31-10-2018 passed by Additional Court No. 3, Agra in Complaint No. 1500 of 2011 (Nepal Singh v. Dhirendra Singh) under Section 138 of Negotiable Instruments Act, 1881(Hereinafter referred as N.I. Act) and the order dated 6-02-2020 passed by Additional Sessions Judge, Agra in Criminal Revision No. 552 of 2018 (Dhirendra v. State of U.P. ) and to quash the summoning order dated 28-3-2012 as well as an entire proceeding of Complaint Case No. 1500 of 2011 pending in the Additional Court No. 3, Agra.

The factual matrix in the instant case is such that the present petitioner borrowed Rs 1,00,000 from respondent 2 and handed over cheques bearing Nos. 850213 & 850214 for repayment of the borrowed amount. However, the cheques were dishonoured by the bank due to insufficient amount in the account subsequent to which respondent 2 served a notice to the petitioner on 18-10-2011. Later, on 08-11-2011, respondent 2 filed a complaint case no. 1500 of 2011 (Nepal Singh v. Dhirendra Singh) under Section 138 of N.I. Act against the petitioner in the trial court. The trial court vide its order dated 28-3-2012 has taken cognizance and summoned the petitioner.

Counsel for the petitioner, Deepak Kumar Kulshrestha has relied on Section 138 of the N.I. Act, submitting that the complainant/respondent is incompetent to lodge the prosecution as the cheques were issued by the firm Rashmi Arosole & Chemicals and the petitioner is the proprietor of this firm but the firm is not arraigned as an accused. He relied on the judgments delivered in the cases of Aneeta Hada v. Godfather Travels & Tours (P) Ltd., (2012) 5 SCC 661 and Devendra Kumar Garg v. State of U.P., 1990 SCC OnLine All 806 and added that until and unless company or firm is arraigned as an accused director or the other officer of the company/firm cannot be prosecuted/punished in the complaint.

Counsel for the respondent, S.B. Maurya attempted to refute these contentions by submitting that the cheques were drawn by the petitioner in his personal capacity and were given by way of security for payment of money. The circumstances do not warrant the arraignment of the aforementioned firm as a party.

The Court perused the cheques closely and concluded that the cheques bear the petitioner’s signature and that there is no dispute with regard to the fact that the petitioner is the sole proprietor of Rashmi Arosole & Chemicals. Also, on perusal of the registration certificate of the firm, it can be established that the petitioner is the sole proprietor of the firm namely Rashmi Arosole & Chemicals.

Upon careful consideration of the facts, circumstances and arguments advances, the Court observed that-

“While a partnership results in the collective identity of a firm coming into existence, a proprietorship is nothing more than a cloak or a trade name acquired by an individual or a person for the purpose of conducting a particular activity. With or without such trade name, it (sole proprietary concern) remains identified to the individual who owns it. It does not bring to life any new or other legal identity or entity. No rights or liabilities arise or are incurred, by any person (whether natural or artificial), except that otherwise attach to the natural person who owns it. Thus it is only a ‘concern’ of the individual who owns it. The trade name remains the shadow of the natural person or a mere projection or an identity that springs from and vanishes with the individual. It has no independent existence or continuity.”

The Court was able to conclude that in a sole proprietary concern, vicarious liability cannot arise because there’s only one person involved. The identity of the sole proprietor and his concern remain one, even if the sole proprietor may adopt a different name for his concern. Hence, there is no defect in the complaint lodged by the respondent. The sole proprietorship firm need not be impleaded for the respondent to realise his claim against the petitioner.

In view of the above, the petition has been dismissed for lack of merit. The Court found no reason to interfere in the orders dated 31-10-2018 passed by Additional Court No. 3, Agra and the order dated 6-2-2020 passed by Additional Sessions Judge against the petitioner. [Dhirendra Singh v. State of U.P., 2020 SCC OnLine All 1130, decided on 13-10-2020]


Yashvardhan Shrivastav, Editorial Assistant has put this story together

Punjab and Haryana High Court
Case BriefsHigh Courts

Punjab and Haryana High Court: A Single Judge Bench of Rajbir Sehrawat, J., dismissed the three petitions which were addressed together involving similar facts but involvement of different cheques and different complaints/proceedings thereunder.

Facts of the case were that petitioner was required to pay certain amount as a result of a settlement between the parties. For the same, petitioner had issued cheque which was dishonoured by the bank and further proceedings under Section 138 of Negotiable Instrument Act, 1881 was carried out resulting into the filing of complaint by respondent. During the pendency of the complaint, the petitioner filed applications for compounding of offences. On refusal to compound the offence by the complainant, the trial court had dismissed the applications. This petition challenged the trial court’s order and prayed for quashing of complaint and summoning order.

The issue before the High Court was to see if the application filed by the petitioner for compounding of the offence under Section 138 could be allowed without complainant’s consent.

The High Court was of the view that the requirement of consent of complainant as a basic ingredient for compounding of offences cannot be dispensed with. Thus, the trial court was right in rejecting the application for compounding of offences on the ground that complainant had not consented for the same. In respect to the prayer of quashing of complaint and summoning order, Court found no factual or legal basis to grant the same. [Anant Tools (Unit No.II) (P) Ltd v. Anant Tools (P) Ltd., 2018 SCC OnLine P&H 1723, decided on 20-09-2018]

Case BriefsHigh Courts

Delhi High Court: A Single Judge Bench comprising of R.K. Gauba, J. dismissed a petition filed under Section 482 CrPC invoking the inherent powers of the Court, seeking the quashing of FIR filed against the petitioner, on the ground of compromise entered into between the parties.

The petitioner was facing prosecution for offences punishable under Section 420 read with Section 511, and Sections 471, 474, 419 and 381 IPC. The allegation against the petitioner was that he was an employee of Kundan Edible Oil Mills. It was stated that the petitioner, in his capacity as the said employee, dishonestly removed a cheque leaf of the said entity against its bank account with HDFC bank. The said cheque was forged and fabricated purporting it to be a cheque issued for the sum of Rs 6 lakhs and was presented to the bank for obtaining payment thereagainst. The cheque, on scrutiny by the Bank, was found to be forged and fabricated. Consequently, an FIR was registered. The petitioner prayed for quashing of FIR and consequent proceedings on the basis of compromise entered into between the petitioner and the respondents.

The High Court noted that during the investigation, the petitioner was unable to account for possession of the cheque which was forged, grave suspicion arising that he knew fully well that it was a forged instrument. Even then, he attempted to use it to commit the offence of cheating by presenting it dishonestly. The Court relied on the Supreme Court decision in Parbatbhai Aahir v. State of Gujarat, (2017) 9 SCC 641 and held that the facts of the case rendered it beyond a dispute that is private in nature. It involved serious economic offence which concerns not only the entity against the account of which the forged cheque was attempted to be encashed but also the bank where the account was maintained. The Court was of the view that this was not a case meriting exercise of inherent powers to bring an end to the prosecution. The petition was, thus, dismissed. [Pawan Gupta v. State (NCT of Delhi), 2018 SCC OnLine Del 11121, dated 23-08-2018]